What Is Chainlink?

08 Aug 2019

Chainlink is decentralized oracle network that connects blockchain-based smart contracts to external data, payment networks, and various real-world events. Chainlink’s secure infrastructure allows smart contracts to link to APIs, in order to communicate with and obtain data from external sources. 

According to its website, the Chainlink network may be used while writing complex smart contracts - as it provides “reliable, tamper-proof” inputs and outputs. As noted by its developers, Chainlink’s secure connectivity features are compatible with most blockchains.

Connecting Google’s Data and Products to Secure Oracles

Chainlink’s network may be used to send payments from users’ contracts to supported payment networks or bank accounts. Notably, the Chainlink team works with SWIFT (a secure bank-to-bank messaging system) to help traditional institutions connect to smart contracts with “enterprise grade” oracles.

In order to improve the security of its network, Chainlink’s development team works closely with established computer science academics and experienced cybersecurity researchers. The Chainlink team also provides highly secure oracles that connect to data and products developed by Google.

Securing the Inputs and Outputs of Smart Contracts

While properly written smart contracts allow different parties to execute “tamper-proof” digital agreements, the inputs and outputs of a contract must also be secure. This, according to Chainlink’s developers, who have written software for establishing reliable connections between smart contracts and external data providers.  

The Chainlink team notes that “truly valuable” smart contracts have been created in a manner that “proves” contractual performance. More complex contracts require multiple input streams, in addition to multiple outputs, according to Chainlink’s developers. 

Secure Middleware Required for Establish Connections to Smart Contracts

The development team explains that multiple inputs and outputs “affect” external systems and may be used to send payments, in order to complete contractual obligations.

Chainlink’s research team further notes that secure middleware is required to establish connections between smart contracts and real-world data sources. The researchers explain that external data stores “trigger” contracts, which “creates the need” for its “high reliability.” 

Smart Contracts Are Unable to Connect to Data Sources On Their Own

Because smart contracts cannot access data on their own, blockchain developers have to figure out how to solve connectivity problems. Most smart contract applications do not have built-in functionality for connecting with off-chain data stores and APIs.

According to Chainlink’s creators, smart contract-based programs cannot connect to external sources due to the “method by which consensus is reached” regarding a blockchain network’s transaction data.

Centralized Oracles Are a “Point of Single Failure”

Chainlink’s technical team claims that centralized oracles are “a point of failure.” Connecting smart contracts to data inputs through a single node also creates the same type of problems, according to Chainlink’s developers. 

By limiting connectivity to a single oracle node, smart contracts become susceptible to a single point of failure as they are only “as reliable as that one node”, Chainlink’s website states. 

In order to implement a more dependable data connectivity system, Chainlink’s team has created a decentralized oracle network that provides the same security “guarantees” as the actual smart contracts.

Ensuring “Overall Value” of Smart Contracts Is Reliable and “Trustworthy”

The Chainlink network aims to eliminate single points of failure by evaluating or checking the same data sources with multiple different links - before allowing the data sets to become “a trigger.” Chainlink’s network also ensures that the “overall value” of smart contracts is secure, reliable, and “trustworthy.”

Chainlink’s native cryptocurrency, called LINK, is one of the main components of its decentralized network. According to CryptoCompare data, Chainlink’s market capitalization, at the time of writing, stands at over $1.2 billion with LINK tokens trading at around $3.48.

“Independent” Node Operators Convert Data to “Readable Formats” for Blockchains

Transactions on Chainlink are conducted using the LINK currency, which is used to incentivize the network’s “independent” oracle nodes. The node operators receive payments in LINK for services they provide to the Chainlink network. These include services related to obtaining off-chain data, performing computations, and converting data sets into “readable formats” for blockchain networks.

As mentioned in Chainlink’s whitepaper, its developers have created an on-chain contract “data aggregation” system and an efficient off-chain consensus mechanism. The Chainlink network also features security and “reputation monitoring” systems that allow users to make “informed” provider selections.

Chainlink Updates May Include “Richly Featured” Oracle Programming 

Moreover, Chainlink’s technology has been designed to provide high-quality data connectivity services even under “aggressively adversarial conditions.” As stated in Chainlink’s whitepaper, the network’s development team is planning to make further improvements to the oracle software - which may include support for “richly featured” oracle programming.

Additionally, future updates may include changes to Chainlink’s existing data-source infrastructure and how confidential (or private) smart contracts are executed.

Chainlink’s LINK Token Price Surges By Over 1,000% 

On June 26, 2019, San Francisco-based crypto exchange Coinbase announced that it would support Chainlink’s LINK token on its platform for experienced traders and investors (called Coinbase Pro). As the top-performing cryptoasset of 2019, the LINK token price has surged by over 1,000% this year. 

On June 28, 2019, the LINK token was listed on Coinbase Consumer (i.e. Coinbase.com), which is accessible through Coinbase’s mobile apps for both Android and iOS users.


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